Mergers and Acquisitions

“Before Google or Facebook, Yahoo! was the king of internet,” Dan Tynan, an American award-winning journalist, writes in Fast Company. “But few today recall how glorious it began.”

Yahoo!, once the biggest Internet company on the planet worth $125 billion at its height, according to Jeremy Ring, a top sales executive at Yahoo! from 1996 to 2001 in his memoir, We Were Yahoo!. Despite proposals from major suitors, the company remained fundamentally single for twenty-three years while acquiring minor and major add-ons along the way.

The cable network, CNBC, reports in March 2000 that Yahoo! and eBay were in talks regarding a possible partnership or merger. Fourteen years later, Yahoo! rejected AOL’s proposal for a merger. In February 2008, Microsoft made a bid to buy Yahoo! for $31/share ($44.6 billion), which Yahoo! rejected. Nine years later on June 13, 2017, Verizon bought Yahoo! core operating business for $4.48 billion, a decrease of 89.96% to Microsoft’s initial offer. Sad.

Where or how did Yahoo! miss it? The answers lie in the company’s choice of relationship status at each point in time.

What is your relationship status?

Are you single?

Is it complicated?

In an open relationship?

In a relationship?

Or divorced?

These are not questions pertaining to marital status. These are questions pertaining to corporate relationship status.

From the beginning of and over the course of your company’s lifetime, it might fall into more than one of these categories at different times. Within each category lies several considerations. And surrounding those considerations are pressures from different stakeholders.

Profitability and survival of your company in the long run are closely tied to its status. And just like human relationships, there are no straight ways to get it right as each relationship has its own peculiarities. But there are always lessons to learn and apply.



Staying single means “do nothing, remain independent and focus on organic growth,” Anna Faelten, Michel Driessen, and Scott Moeller, write in their book, Why Deals Fail & How to Rescue Them: M&A Lessons for Business Success.


Facebook Inc.

Facebook is single

Following its launch on February 4, 2004, the social media giant, Facebook, has engaged in over 70 corporate marriages, from minor to major ones, with each acquisition ranging from millions to billions of dollars. And the king of social media is not stopping any time soon. Just recently, in June 2020, the Internet woke up to the news of the company’s acquisition of Swedish mapping start-up, Mapillary, as part of its effort to take on Apple and Google at street-level mapping.

“But as for being a target, Facebook has been adamant in retaining its single status, even when surrounded by large admirers,” Faelten et al. write.

11 companies tried to acquire Facebook, according to Nicholas Carlson, the Global Editor-in-Chief at Business Insider, in an article for the Inc. He writes, “As early as 4 months after Facebook’s inception, people with money and people representing companies with money began lining up to beg Facebook cofounder and CEO, Mark Zuckerberg, to take their cash and sell the company.”

In 2006, Yahoo! offered to buy Facebook for $1.4 billion, an amount which Faelten et al. describe as a fortune for its founder, Mark Zuckerberg, who had co-created the social-networking platform as part of a “Would You Rather?” college jape just a few years earlier.

The loudest offer came from Microsoft in 2007, and David Kirkpatrick writes in The Facebook Effect: The Inside Story of the Company That is Connecting the World, that “Zuckerberg, as usual, was unimpressed, even by this fabulously extravagant offer.” The then Microsoft CEO, Steve Ballmer, who seemed really frustrated already, had made the loudest offer to Zuckerberg in form of a question, “Why don’t we just buy you for $15 billion?”

The tale of what becomes of Facebook after its encounter with Microsoft is the opposite of what becomes of Yahoo! after its encounter with the same company. These differing outcomes are not a result of luck, but choices.

When deciding whether to stay single, the following are some factors to consider:

·         Timing

After 8 years of remaining adamantly single, Faelten et al. write that Zuckerberg hit pay dirt when the company’s flotation catapulted his personal net worth to $28 billion (an increase of 87% to Microsoft’s $15 billion offer), thanks to his determination to stay corporately single at a crucial time. And according to YCharts, Facebook market capitalisation as of September 8, 2020, was $769.18 billion.

Please breathe. Timing is everything when it comes to deciding whether to stay single or not.

The first years of starting a company are crucial. Vanguard reports in 2013 that financial experts say about 80 percent of Small and Medium Enterprises (SMEs) in Nigeria fail within the first five years of their existence due to lack of experience and other wrong business practices.

 As such, this is the period you are faced with “double jeopardy”—especially if your business has great potential— which is, whether to face the initial challenges attributed with starting up a business or to simply sell to a potential investor with large capacities and well-structured managerial experience.

Financing your business is also crucial to its success at that period. You can either get investors to inject funds into your business and continue operating it (Facebook and Apple received $240 million and $150 million cash injection respectively from Microsoft), or sell to a buyer that can maintain your company’s strength in the market position while expanding it.

·         Sectoral Trends

“When considering whether to merge or buy, sectoral trends can be crucial,” Faelten et al. write. “Whether rivals are consolidating rapidly or whether they are breaking down and demerging.”


The big 4 audit firms

The big 4 accounting firms: Big is good, biggest is best

The Big 4 is the collective nickname used to refer to the biggest four accounting and professional services networks in the world: Deloitte, Ernst & Young (EY), KPMG and PricewaterhouseCoopers. Before 1987, they were referred to as the Big 8, which were made up of Arthur Andersen, Arthur Young & Co., Coopers & Lybrand, Deloitte Haskins & Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse and Touche Ross. Most of the 8 firms were the result of mergers and alliances between British and US audit firms in the 19th and early 20th centuries.

Later in 1989, the two huge mergers (Ernst & Whinney merged with Arthur Young & Co. to form Ernst & Young,while Deloitte, Haskins & Sells merged with Touche Ross to form Deloitte Touche) reduced the Big 8 to Big 6.

The knockout tournament continued in 1998 when Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers (famously known as PwC), thereby reducing the group to the Big 5. And after the fall of Arthur Andersen in its involvement in the world-shocking Enron scandal, the number shrank to the Final Four.

In essence, firms in the same sector with the big 4 that could not follow the consolidation trend at that period either wound up or plummeted to mid-tier.

Although the affiliation came at some cost to the Big 8 partners in loss of autonomy, it was unavoidable at that period if an audit firm was to remain significant. Many of the Big 8’s publicly traded clients were growing in size, requiring heftier cadres of public accountants.

In 1990, Ross L. Watts and Jerold L. Zimmerman write in their fundamental paper, “Positive Accounting Theory: A Ten Year  Perspective”, published by the American Accounting Association, in The Accounting Review, Vol. 65, No. 1 (Jan. 1990), pp. 131-156, that an accounting firm achieves several advantages by being larger, including economies of scale, development of a brand name and the bonding provided by a very large group of accounting firm partners all putting their professional capital at risk in forming a large firm.

Royston Greenwood, David J. Cooper, C. R. Hinings and John L. Brown, in discussing the motivation for Canadian firms to merge with each other, write in their article, “Biggest is Best? Strategic Assumptions and Actions in the Canadian Audit Industry”, published in the Canadian Journal of Administrative Sciences, Vol. 10, Issue 4, (Dec. 1993), pp. 308-321, that they perceive the firms as making an assumption that “big is good, but biggest is best. The advantages of size, as perceived by the firms, were (1) reputation – bigger firms are more likely to be invited to tender for audit engagements; (2) spreading costs to price competitively (while investing in technology and training); (3) as the only means of differentiation that is readily available to accounting firms; and (4) the ability to service the overseas operations of clients.”

There are several instances of emerging sectoral trends if you really take time to observe. When you peep into the Nigerian legal sector for example, you will observe that the top law firms in the country are made up of partnerships, as opposed to sole proprietorships, or rather, singletons.

In contrast, the Nigeria fintech industry is made up of singletons, such as, Piggyvest, Renmoney, VBank, Rubies Bank.

·         Overriding Company-Specific Issues

This relates to your perception of your company. It is about looking the other way because of your strong belief in your company’s potential, despite your awareness of the (opposing) sectoral trends prevailing in your industry.

Overriding company-specific issues can be likened to human relationships, such as when you decide to stay single when your peers are entering into serious relationships. Or when you believe entering a relationship is the best status for you, during a period when your mates are single, busy chasing their careers.

In commenting on overriding company-specific issues, as there were with Facebook, Faelten et al. write that, “Zuckerberg was one of the few people in the world who could see his company had a prime-mover advantage in a truly new industry, so he rightly held out as a singleton.”

The Nigerian fintech industry has very few documented start-up M&A. While PiggyVest, CowryWise, Renmoney and many others remain single, Amplify changed its relationship status in 2019 when it was acquired by Carbon.

Survival is the language.

·         Government Policies and Regulations

Government policies and regulations have a huge impact on the status and operations of companies. Often, a shift in regulations changes the playing field for business operation permanently.

As noted earlier, the Nigeria fintech industry is dominated by singletons. Players in the industry have had to acquire MFB licences over the last few years due to absence of digital banking licence in the country, and there are no plans to develop one.

However, this corporate status attributed to the industry may change by April 1, 2021 due to Central Bank of Nigeria (CBN) new revised supervisory and regulatory guidelines for Microfinance Banks (MFBs).

On October 22, 2018, the CBN issued a circular to all MFBs reviewing the minimum capital requirement of the banks in Nigeria. The review seeks to increase Unit MFB requirement from N20 million to N200 million; State MFB from N100 million to N1 billion; and the National MFB from N2 billion to N5 billion.  The new guidelines are scheduled to become active by April 1, 2021. In the continued absence of a digital banking licence, fintech companies may have to consider merging in order to fulfil the capital requirement.


CBN 2004 banking sector recapitalisation policy

On July 6, 2004, the Central Bank of Nigeria (CBN) announced a reform programme for the nation’s banking industry, the main thrust of which required the then 89 deposit money banks in the system to raise their capital base to a minimum of N25 billion each through injection of fresh capital and/or M&A. This led to wave of consolidations reducing the banks to 21.

The issuance of new or revised government policies and regulations in specific sectors of the economy may affect the way of doing business in such sectors. By implication, such rules and frameworks may force businesses in the affected industries to change their corporate status. Else, a company may be required to shut down for non-compliance. This was the fate of Skye Bank PLC in September 2018 when its operating licence was revoked by CBN due to failure of the bank’s shareholders to recapitalise the bank.


Access Bank PLC

There are also anti-trust laws in various country regulating competition and protecting consumers from predatory business practices.

“A few examples can be found in industries that have already consolidated so deeply that governments and regulators will protect the status quo to ensure they do not become any more concentrated,” Faelten et al. write. “An example of this is accountancy where, after the collapse of Arthur Andersen made the Big Five a Big Four, regulators have made clear they would save any of the remaining four in the public interest, should they suffer a major scandal, and that mergers among them will be blocked.”

In Nigeria, the Federal Competition and Consumer Protection Act, 2018 (FCCPA) regulates competition and merger control regime in the country. To this effect, explanatory memorandum to the Act provides that the “Act establishes the Federal Competition and Consumer Protection Commission and the Competition and Consumer Protection Tribunal for the promotion of competition in the Nigerian markets at all levels by eliminating monopolies, prohibiting abuse of a dominant market position and penalising other restrictive trade and business practices.”

As a result, any attempt by one of the Nigeria’s tier-1 banks – comprised of First Bank, UBA, GTBank, Access Bank and Zenith Bank (FUGAZ) – to merge with another will be fiercely fought by regulators, though these five banks may make smaller, bolt-on or complementary/adjacent acquisitions, for instance, Access Bank acquired Diamond Bank on April 1, 2019.

·         Culture clashes

“The thing I have learned at IBM is that culture is everything,” says Louise V. Gerstner Jr., former IBM chairman and CEO, in a discussion with MBA students at Harvard Business School.

Every company has its own culture, its way of operating business. It is important to note that entering a relationship with another company may either complement your company’s culture or destroy it.


Slaughter and May

Culture with Access Bank, Slaughter and May

Herbert Wigwe, Access Bank’s CEO and Managing Director, while commenting on how the Diamond Bank and Access Bank merger will enhance their respective culture, points out that the merger would afford both banks the opportunity of leveraging on their distinct potentials to build a stronger bank. Diamond Bank is expected to benefit from Access Bank’s strong risk management culture and capital management expertise, while Access Bank stands to benefit from Diamond Bank’s substantial retail banking expertise and strong digital offering.

The story is different for Slaughter and May.

“In London, Slaughter and May is known as the firm that refused to globalise, or to accept branding developments at a time when its rivals rushed towards globalisation, stealing ideas from other, less traditional, professional service industries along the way. For any other law firm, this refusal to move with the times would have sounded its death knell or it would simply have been absorbed into a larger consolidator,” Faelten et al. write. “The secret of Slaughter and May’s success is that it advises more of the UK’s FTSE 100 and 250 companies than any of its rivals, giving it an in-built advantage over the competition.

“As other firms rushed to find international partners, lawyers at Slaughter and May saw the cultures of their rivals being diluted and decided that, as long they did not have to, they did not need to merge. As a result of this vote of independence – or, indeed, in spite of it – Slaughter and May has consistently been the most profitable among major European law firms. It has managed to keep its top-notch client base and, perhaps most importantly for those who control the business, its culture.”


It is therefore important, when considering whether to stay single, to give a deep thought to your company’s culture and what your company stands for, as well as the other company’s culture and what they stand for. And at the end, you calculate your potential gain or loss before a corporate marriage.

Finally, an important point to note is that staying single may just mean you have to change yourself. Berkshire Hathaway changed its business industry from textile to insurance and investment sector. It was one of the most successful crossovers in the U. S. business history.


The choice to stay single, as seen above, is like a battle. However, choosing to enter a relationship is the entire war. So before going into war, it is simply wise to consider available alternatives.